In the last few years, the life insurance industry has seen high attrition of individual agents largely due to low remuneration. At the same time, the contribution of bank channels in selling life insurance policies has gone up.
According to the annual report of the Insurance and Regulatory Development Authority of India (Irdai), corporate banks had a share of 47.37% of individual new business premium in 2014-15, while the share of private insurers in 2012-13 was 43.08%. On the other hand, individual agents who had share of 39.68% of individual new business premium in 2012-13 came down to 35.73% in 2014-15 for private insurance players.
Vignesh Shahane, CEO and whole-time director at IDBI Federal Life Insurance, says, “In the last few years, we have seen that it has become unenviable for individual agents to become commercially viable due to low compensation. It is a challenging time for individual agents as many full-time agents have now turned part-time agents.”
The data from Life Insurance Council shows that at the end of March 2016, there were 20.16 lakh individual agents, down from 20.67 lakh individual agents in 2014-15. Senior officials in the industry added that, one of the major reasons of banks contribution going up is due to the loyal customer base and the low cost compared to hiring individual agents.
“Individual agents are also facing credibility issues as they often move from one insurance company to another for higher commissions. Also commissions have gone down in the past few years and apart from the industry, we have also seen high attrition of individual agents in Life Insurance Corporation of India (LIC),” said a marketing officer in an insurance company.
Sunil Sharma, appointed actuary at Kotak Mahindra Old Mutual Life Insurance, said, “There are a few things which go in favour of bank channels selling insurance. First, they are experienced and trained people; second, target customers are ready; and finally, there is trust in bank by investors.” However, he also emphasised that Kotak Mahindra Old Mutual Life is having diversified distribution network in both the channels.
Many players in the industry believe that, there should be an ideal mix of individual agents and banks to gain market share in such competitive environment. “We cannot just depend on either agents or banking channels. While banks are important as they bring in most business where we don’t have any our individual branch, it is equally important to have individual agents in this business,” said a CEO of a leading insurance company.
Insurance players believe that, unless individual agents get economic of scale, their survival in this industry will become more difficult, while banks are likely to continue their dominance in selling insurance policies.
